Status: The State has begun the process of implementing comprehensive unbundling programs for its residential gas customers.

Overview: Since July 1, 2000, Virginia law has allowed utilities to offer statewide customer choice programs if approved by the State Corporation Commission (SCC). Effective April 1, 2001, Washington Gas Light (WGL) became the first utility with authorization to permit all of its customers in the State to buy natural gas directly from a certified, retail energy supplier. The program was phased in during a 1-year period, with choice available at first to 150,000 residential customers and then to the rest of the company's residential customers in the State in January 2002. As of January 1, 2006, 53,195 residential customers (13 percent of eligible) in WGLís service territory were enrolled (which includes customers of Shenandoah Gas Company, a division of WGL), down from about 62,000 (16 percent) in January 2005 and 67,000 (18 percent) in January 2004. Columbia Gas of Virginia also has had a choice program in place for all customers in its service area since October 1, 2002, with about 7,370 residential customers and 1,988 nonresidential customers enrolled as of July 1, 2005. In 2004, about 8,818 residential customers and 1,212 nonresidential customers were enrolled. Previously, the company had conducted a pilot program since 1997 in selected areas of Northern Virginia, with about 9,600 residential customers enrolled as of July 2002.

As of August 2005, six marketers were serving residential natural gas customers in the State, with both WGLís and Columbia Gas of Virginiaís programs having four active marketers. In its most recent annual report (September 2005) on the status of retail access and competition, the SCC noted that about 83 percent of residential choice customers and 82 percent of the non-residential customers in WGLís service area buy gas from WGLís affiliate Washington Gas Energy Services. In Columbia Gas of Virginiaís area, choice service accounts represent about 4.7 percent of all customers, with two nonregulated affiliates serving the greatest number of customers.

On June 20, 2001, the SCC adopted permanent rules for energy choice that became effective on August 1. These rules require that local distribution companies provide marketers with names and addresses of eligible customers and their monthly energy consumption for the previous 12 months, if customers choose to have the information released. All bills must use standard terms and include a customer's monthly energy consumption for the past 12 months and a description of all applicable charges and rate changes. Marketers must be licensed by the SCC and demonstrate the financial and technical ability to deliver services to Virginia utility customers.

EIA State Data: In 2004, Virginia had 1,029,389 residential and 87,919 commercial customers who consumed 83 and 65 billion cubic feet of natural gas, respectively. The average prices paid for natural gas purchased from local distribution companies by residential and commercial customers were $13.04 and $10.13 per thousand cubic feet, respectively.

Eligibility/Participation in Retail Choice Programs:

Status as of December 2005: Number of Customers

Customer
Type

Total 2004

Eligible
December 2005

Participating
December 2005

Total

Percent of
2004 Total

Total

Percent of
Eligible

Percent of
2003 Total

Residential

1,029,389

603,725

58.6

60,565

10.0

5.9

Commercial*

87,919

45,253

51.5

8,195

18.1

9.3

Total

1,117,308

648,978

58.1

68,760

10.6

6.2

Virginia: Legislative and Regulatory Actions on Retail Unbundling

Summary: The Virginia General Assembly enacted legislation on July 1, 1999, that allows all gas utilities in the State to offer retail supply choice to its customers as of July 2000. All retail choice plans must first be approved by the State Corporation Commission. The legislation was reenacted and modified in 2000 and included provisions for a natural gas consumption tax that would be added to customers' bills. The General Assembly has also passed legislation (enacted July 1999) that opened the retail electricity market to competition during a phase-in period from January 1, 2002, to January 1, 2004. Competitive suppliers participating in natural gas pilot programs must apply for a permanent license and operate under rules adopted by the SCC that became effective on August 1, 2001. In order to become licensed, a provider must demonstrate the financial and technical ability to deliver services to Virginia utility customers. Retail choice rules apply to both natural gas and electricity markets.

Regulatory and Legislative Actions

Legislation

3/00

Modifications to Retail Choice Legislation,
HB 279 and SB 185. Legislation approved (enacted
July 2000) that authorizes gas suppliers, pipeline distribution companies,
and gas utilities to file a retail supply choice plan that includes
provisions to implement the program, methodology to recover stranded
costs, proposed unbundled rates and terms, and provisions to insure that
one class of customer does not subsidize another class. The bill would
also create a natural gas consumption tax, which would be added to the
consumer's bill.

3/99

Statewide Retail
Choice Approved, Senate Bill 1105. Legislation was approved
(enacted July 1999) that authorizes all natural gas local distribution
companies to offer supply choice to their customers. Such plans are to be
approved by the SCC and would not start before July 2000. The law also
calls for a study of gas utility taxation issues before the 2000
legislative session. The legislation will expire on July 1, 2000, unless
reenacted by the General Assembly.

Regulatory Actions

9/05

Annual Report on Status of Competition.
Report focuses on electric power competition but
appendix provides a summary of gas retail access programs. WGL's program
has four active marketers serving about 56,000 residential customers and
12 marketers serving 6,977 non-residential customers. Columbia Gas of VA's
program has four marketers providing service to 7,370 residential
customers and 1,988 non-residential customers. Cumulatively, choice
customers account for about 14.6 percent of gas consumers in WGL's service
area and 4.2 percent of those in Columbia Gas of VA's
area.

9/04

Annual Report on Status of Competition.
Report appendix provides a summary of gas retail
access programs. WGL's program has four active marketers serving 65,840
residential customers and 12 marketers serving 7,155 nonresidential
customers. Columbia Gas of VA's program also has four marketers providing
service to 8,818 residential customers and 1,212 non-residential
customers.

8/03

2003 Report to the Governor on Status of
Competition. Report provides details on development of
competitive retail energy markets, with emphasis on electric power
markets. Appendix notes that marketer activity has been better in the
natural gas program than in electric programs but actual level of
competition may be distorted because of the high level of affiliate
concentration.

6/02

Columbia Gas Authorized to Extend Choice to All
Customers. The SCC authorized Columbia Gas of VA to extend
its customer choice program to all its customers in the State. The company
serves about 200,000 customers in central Virginia, portions of the
Shenandoah Valley, portions of Northern Virginia, and part of the Hampton
Roads region, including Suffolk and Portsmouth. The company plans to
implement its choice plan in time for the 2002-2003 heating
season.

4/01

Washington Gas Authorized to Extend Choice to
All Customers. The program is being phased in during a one-year
period, with choice available at first to 150,000 residential customers
and then to the rest of the company's residential customers in the State
in January 2002.

6/01

Permanent Retail Choice Rules
Adopted (effective August 2001). These rules require that
local distribution companies give marketers the names, addresses, and
monthly energy consumption for the year (previous 12 months) of eligible
customers, if customers' choose to have the information released. All
bills must use standard terminology for distribution service, competitive
transition charge, natural gas supply service, and taxes. Bills must
include a customer's monthly energy consumption for the past 12 months and
a description of all applicable charges and rate changes. Marketers must
be licensed by the SCC and demonstrate the financial and technical ability
to deliver services to Virginia utility customers

2/00

Retail Access Pilot
Program Rules, Order Inviting Comments, Case PUE980812. The SCC
revised proposed standards governing retail access pilot programs
presented in the hearing examiner's August 1999 report. The rules cover
the relationship between LDCs and competitive service providers, their
responsibilities to retail customers, and licensing requirements for
competitive service providers. The revised rules are more detailed than in
the hearing examiner's report and include a definitions section and a
section on requirements for aggregators. Written comments are due by
2/24/2000.

12/99

Consumer Education
Program Plan, SCC Report to Legislature. The SCC recommends a
5-year education program to inform consumers about energy choice in
Virginia. The program would require mass media marketing and advertising
and would be funded through the SCC's special revenue tax assessed on
regulated utilities. The report will be considered by the Legislative
Transition Task Force, which was established to monitor the State's energy
restructuring effort.

8/99

Columbia Gas Pilot
Extended, Case PUE990245. The SCC approved continuance of
Columbia's customer choice program (formerly Commonwealth Choice) until
October 1, 2000, provided that the company file an interim balancing study
by the end of August 1999 and a final balancing report at the end of the
pilot. Originally the pilot was approved for the 2-year period from
October 1997 to October 1999. About 25 percent (6,500) of eligible
customers are participating.

8/99

Retail Access Pilot
Program Rules, Hearing Examiner Report, Case PUE980812. The examiner recommended that the
task force's proposed rules be adopted with limited modifications and
clarifications. Marketing materials must include clear pricing terms and
residential monthly bill estimates based on 7.5 thousand cubic foot
consumption. Customers have a 3-day rescission period. Deposits required
by marketers cannot exceed the equivalent of a customer's estimated
liability for 2 months of service. Marketers must have sufficient gas
delivery capability to serve their firm customers; if not, LDCs can impose
penalties. A utility may not give its affiliates any preference in
providing regulated services; may not tie regulated service to any other
product; and may not disclose any customer-specific information (unless
requested by customer). Utilities and affiliates must maintain separate
books and records. All aggregators and competitive service providers must
be licensed by the Commonwealth. License applications must identify
geographic area of proposed service, name of LDC certified to serve the
area, and include sufficient information to indicate "financial fitness"
for providing proposed services.

3/99

Standards of
Conduct: Task Force Report. Report proposes standards of conduct governing
issues common to both retail gas unbundling programs and retail access
pilot programs for electric utilities. The rules address conduct standards
for competitive service providers, LDCs and their affiliates, and
licensing and filing requirements. Formal hearings are scheduled to allow
comment by all interested parties, with a hearing examiner assigned to
conduct all further proceedings.

12/98

Number of
Commercial/Industrial Customers in WGL Pilot
Increased, Case PUE971024. The SCC approved Washington Gas
Light's (WGL) request to expand the number of eligible commercial and
industrial customers to include all applications received by 12/9/98,
which is the last date to apply for service beginning 1/1/99. The original
program covered 10 percent, and WGL has received applications from about
16 percent of the customer class.

6/98

Approval of WGL
Pilot Program, Case PUE971024. The SCC approved a 2-year pilot
program that would allow Washington Gas Light to provide delivery-only
service to 10 percent (20 percent the second year) of eligible firm
bundled service customers. Balancing service would be offered to suppliers
on an annual basis the first year and monthly the second year. Qualifying
suppliers must aggregate at least 100 dekatherms of average daily contract
quantities.

3/98

Special Rate
Guidelines, Case PUE970695. The SCC adopted guidelines for
utility applications for special rates for particular customers or
customer classes. Utilities must show the effect of such rates on total
company revenues, total company expenses, and the return on rate base (if
applicable), as well as the rate impact on other customers. Applications
will be reviewed on a case-by-case basis.

9/97

Approval of Commonwealth Gas Service Pilot
Program, Case PUE970455. The SCC approved a 2-year pilot
choice program for residential and small commercial customers in the
Gainesville area. The program will begin October 1, 1997, and continue
until October 1, 1999. Enrollment will be open rather than limited to a
particular period, aggregation service agreements are to be included in
the tariff as well as provisions that participating marketers must respond
to SCC data requests, and the company is to conduct a balancing study
"using daily load sampling in conjunction with the pilot to gather
information about customer gas consumption in comparison with load
profiles used by marketers." The SCC also directed that a task force be
established to develop a code of conduct to govern retail gas unbundling.